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Key points

  1. When a big country industrialises, demand grows for years, while new mines take over 16 years to arrive. The supply that finally comes then overshoots, and prices fall for years.
  2. The four waves were set off by US industrialisation, war and rebuilding, the oil shocks, and China.
  3. Farm goods ride the same waves about as strongly, so slow mines are not the whole story.
  4. What differs is the long-run direction: farm goods have got 0.9% cheaper a year, while mined goods have held about level.

The mechanism

  1. 1
    Demand grows for a long time

    When a large economy industrialises and urbanises, its use of steel, copper and energy rises for a decade or more, longer than a normal business cycle.

  2. 2
    Supply responds only with a long lag

    Mines take more than 16 years on average from discovery to first output (IEA, major mines that started in 2010–19). Higher prices cannot bring new supply quickly.

  3. 3
    The late supply then overshoots

    Projects approved at high prices start producing just as demand growth slows, and the surplus drives a long downswing.

Every upswing in the index took about 15 years from trough to peak, close to the time it takes to bring a new mine into production. That fits the story, though four waves are too few to prove it.

Sources: Erten & Ocampo 2013 ／ IEA 2021

The four waves and their backdrop

1

America's industrialisation and the First World War

Trough 1903 → peak 1917（+26%） → next trough 1932

Why prices rose
From the late nineteenth century the United States industrialised fast, and demand for steel, copper, coal and grain grew for years. The First World War added to it.
Why it ended
The post-war slump and the Great Depression from 1929 cut demand just as supply had grown. Prices fell well below trend, bottoming in the early 1930s.

Sources: Erten & Ocampo 2013 ／ Heap 2005

2

Rearmament, post-war reconstruction and the Korean War

Trough 1932 → peak 1947（+4%） → next trough 1966

Why prices rose
Rearmament in the late 1930s, the Second World War, then the rebuilding of Europe and Japan's rapid growth kept demand up.
Why it ended
Strong world growth in the 1950s and 1960s made the downswing mild. On this index (1975 production weights) the upswing itself is also small.

Sources: Erten & Ocampo 2013

3

Oil shocks and 1970s inflation

Trough 1966 → peak 1981（+51%） → next trough 1996

Why prices rose
The 1973 oil embargo nearly quadrupled the oil price, and the 1979 Iranian revolution sent it up again, on top of the inflation that followed the end of dollar–gold convertibility in 1971. Excluding energy, this wave is much smaller.
Why it ended
In the 1980s new supply started at high prices (the North Sea, Alaska) and energy saving left oil in surplus, and it crashed in 1986. Metals also fell for most of the 1980s and 1990s.

Sources: Fed History (1973–74) ／ Fed History (1978–79) ／ Erten & Ocampo 2013

4

China's industrialisation and urbanisation

Trough 1996 → peak 2011（+35%） → next trough ongoing

Why prices rose
Between 1997 and 2017 China's share of world metals consumption rose from 10% to 50%, and it accounted for four-fifths of the increase. From 1998 to 2008 real energy prices rose five-fold and metals 140%.
Why it ended
China slowed in the 2010s just as mines and shale oil approved at high prices came on stream, and oil and metals fell hard in 2014–16.

Sources: World Bank 2018 ／ Heap 2005

Minerals versus farm goods

If long mine lead times were the whole story, minerals would swing far more than crops, which can be replanted each season. The data only half agrees.

The wave in three groups of commodities (% above or below each trend)
Size of the waves (typical swing)Peaks
Grown (farm and animal products)15%1915, 1945, 1975, 2016
In the ground (energy, metals, minerals)24%1919, 1955, 1981, 2010
In the ground, excluding energy15%1914, 1939, 1982, 2012

As indices, goods from the ground swing more, but mostly because of energy: without it, their waves are no bigger than those of farm goods. Commodity by commodity, the typical wave is about the same size in both groups (a typical swing of 22% for 20 goods from the ground, 21% for 22 grown goods), and they move together about as closely within each group (0.50 and 0.51) and across the two (0.39).

So supply lags alone do not explain the waves; something moves all commodities at once. Likely candidates are world growth (which Erten & Ocampo find leads non-oil prices), energy as a cost of growing crops, and the dollar and inflation.

The long-run trend differs

Where the two groups do differ is the trend underneath the waves. The median grown commodity has lost 0.9% a year in real terms over its history, as farming productivity rose; the median commodity from the ground has been close to flat (-0.1% a year). Each wave starts from a lower base for crops. Erten & Ocampo see this as support for the Prebisch–Singer idea that primary goods lose value against manufactures over time.

Oil is the exception

For most commodities, world growth comes first and prices follow. For oil Erten & Ocampo find the reverse: oil price jumps come first and hold back world growth. The 1970s wave, the biggest on this index, was an oil wave.

Updated 29 Sep 2026 02:33 JST · annual data to 2025 · monthly prices to Aug 2026